The way we bank is on the cusp of a significant transformation driven by higher customer expectations, and this change will be fuelled by generative AI. The technology has the potential to reshape the industry in profound ways, impacting everything from customer experience to operational efficiency behind the scenes. In this article, we delve into the topic with Byron Evans, AI Product Director at Mercer, to explore how generative AI is poised to disrupt banking.

A Gradual Journey, Not an Overnight Revolution

While the potential of generative AI is undeniable, Byron emphasises that its impact will unfold over time, with learnings coming as the technology advances. The initial phase, likely spanning the next two years, will focus on integrating this technology into everyday banking tasks. This approach will involve automating repetitive processes and enhancing existing functionalities.

Following this initial wave, a more transformative stage will emerge. As banks gain a deeper understanding of generative AI’s strengths and limitations, they’ll be able to develop truly innovative products and services. This will require collaboration between product teams, customer insights specialists, and technology experts, fostering a culture of experimentation, but carried out in a planned and careful way.

“For me, when you look at any of these big technology waves, you tend to have two waves,” highlights Byron. “You tend to have the first wave, which is ‘how can we do the things that we’re currently doing now but better, more efficient, more effective?’, then you have the second wave, which is where the real innovation generally tends to happen. That’s when we tend to have grasped what the technology is able to do in terms of its strengths, but also its weaknesses as well.”

Empowering Customers and Streamlining Operations

One of the most exciting applications of generative AI lies in financial education. Imagine your customers having access to a virtual financial advisor at their fingertips, offering personalised guidance and demystifying complex financial concepts. Generative AI-powered chatbots can now evolve from rudimentary tools to sophisticated virtual agents, capable of engaging in natural conversations and providing tailored financial insights. This increase in personalisation won’t only help customers, but also banks.

“I’m glad that they’re being rebranded as kind of agents or virtual agents, particularly within the generative AI context because chatbots have such a negative connotation,” offers Byron. “I can only think about my experience largely when using these chatbots, most of the time, I’m hoping that they just give me a phone number at some point.”

“If you now provide that knowledge and that context for a very engaging interface, and in a very conversational manner, you can really kind of bring it to life,” adds Byron. “It could really enrich the experience but also help people to make better financial decisions, and I think we all win out of that, banks win out of that, but also society as a whole. So I think that’s incredibly exciting.”

Beyond customer-facing applications, generative AI offers significant operational benefits. Using the technology to automate data extraction from documents, a notoriously time-consuming task in commercial banking, could significantly improve efficiency. This frees up valuable staff time, allowing them to focus on more strategic tasks and provide a higher level of one-to-one service to customers when necessary.

“There’s a huge potential here operationally for a lot of these banks, particularly when you kind of go outside of the retail market and into more kind of business banking and commercial banking, where things have been harder to automate given the levels of nuance,” explains Byron. “So with generative AI and using its ability to understand the context of data, you can make data ingestion and extraction a lot more efficient.”

Byron predicts that 2024 will be a pivotal year for generative AI in banking. The primary focus will be on establishing this technology as a core capability: we can expect to see further integration into existing tools and workflows, alongside advancements in data processing and automation. This groundwork will pave the way for the true innovation that will define the next stage of the AI revolution in banking.

A Cultural Shift: Embracing AI for Competitive Advantage

As we move into this new era of banking, the way organisations approach generative AI will speak volumes about their commitment to innovation. Banks that empower their employees to experiment with this technology and leverage its potential to benefit customers will be best positioned to thrive in the years to come.

“I think for organisations, if they’re serious about building products that customers love, then I think this is hugely exciting,” enthuses Byron. “I think you can probably tell a lot about an organisation by how they are embracing AI, and whether they’re really putting it central to their strategy, and from a cultural point of view how they’re looking to empower colleagues to experiment with this kind of capability.”

As the industry evolves, embracing AI will be a critical differentiator for banks seeking to maintain a competitive edge.

“I know it’s an old saying that kind of knowledge is wealth, but actually, when it comes to making financial decisions for a lot of people it really, truly is, so being able to have that kind of that knowledge and expertise at people’s fingertips in a very accessible way as well I think that could be incredibly powerful,” offers Byron.

Challenges and Considerations

Despite the excitement surrounding generative AI, it would be remiss to ignore the challenges that it presents. Keeping pace with the rapid evolution of the technology can be daunting for organisations, and the heavily regulated nature of the banking industry means that a cautious approach is required, ensuring compliance with data privacy and security regulations, including those that haven’t been brought into place yet.

“I think that can be quite overwhelming for a lot of organisations and for a lot of leaders, actually, so I think that’s going to be one of the main challenges, and when we’re talking about banking, we’re talking about very heavily regulated industry as well, so it’s about being able to kind of leverage this technology but we need to ensure that we’re doing it in a safe and secure manner,” stresses Byron.

The future of banking is undeniably intertwined with generative AI, despite any barriers that could hinder the implementation of these advancements. By correctly harnessing the power of this technology, banks can create a more personalised, efficient, and accessible banking experience for their customers.

“This is going to be a journey, and I think 2024 is still very much at the beginning of that journey,” highlights Byron. “I think the biggest trend for me is to see this capability just be embedded into our day-to-day lives. We’re starting to see that with people using things like Chat GPT regularly. I think it’s going to become a core part of our lives, much like Google is in my life, I don’t know what I’d do without Google, I can’t imagine a world without it.”

“I feel like in terms of the true innovation and that next step in really trying to push these products forward, we may have to wait a little bit more time for that,” offers Byron.

As we move forward in 2024 and beyond, keeping a close eye on the evolving landscape of generative AI will be crucial for anyone involved in the financial services industry.

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